2016 (11) TMI 607

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....M/s Subbaraya Aiyar JUDGMENT ( Judgment of the Court was delivered by Dr. Anita Sumanth., J ) 1. This Tax Case Appeal at the instance of the Revenue, challenges an order of the Income Tax Appellate Tribunal, Madras, dated 04.02.2015 in ITA No.1071/Mds/2013, raising the following substantial question of law for determination:- Whether on the facts and circumstances of the case, th....

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....cause notice dated 28.02.2013 on the ground that the interest payable on borrowed capital utilized for payment of dividend to the preferential shareholders was not liable to have been allowed as a deduction under Section 36(1)(iii) of the Act. 3. The Commissioner of Income Tax noted that the assessee had shown a net deficit in the profit and loss account. Thus, according to the CIT, dividend ha....

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....after consideration of various decisions on the issue that settled the position that interest paid on borrowings for declaration of dividend constitutes expenditure incurred for the purpose of business allowable as a deduction in terms of Section 36(1)(iii) of the Act. The present appeal by is filed by the Revenue assailing the aforesaid order of the Tribunal. 6. We have heard Shri T.R.Senthilk....

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.... business of the assessee and is an allowable deduction in terms of Section 36(1)(iii) of the Act. (See CIT vs. Tingri Tea Company Ltd (79 ITR 294), Commissioner of Income Tax vs. Changdeo Sugar Mills Ltd. (1982) (31 CTR (Bom) 114, Kesar Sugar Works Ltd. vs. Commissioner of Income Tax (1997) (140 CTR 431)) 8. The CIT relies on the decision of the Karnataka High Court in Kirloskar Electric Co. L....